A note to Tufts Climate Action and its members:
After reading your recent Op-ed, I am perplexed and disappointed. Though I applaud your continued persistence to goad Tufts into divesting from fossil fuels, an action which would have virtually no effect on either the climate or the financial success of applicable corporations, I remain disappointed that you have not worked towards a better understanding of financial markets to improve your dialogue with Tufts. Additionally, I would like to point out several features of the Massachusetts Uniform Prudent Management of Institutional Funds Act that you appear to have overlooked.
Title XXII, Chapter 180A, Section 2.3 states that “management and investment decisions about an individual asset shall not be made in isolation but shall be made … as a part of an overall investment strategy having risk and return objectives reasonably suited to the fund and to the institution.” As I wrote in my previous article, “Op-ed: Dear TCU Senate and TCA, mind your own business,” you do not understand the risks associated with environmental, social and governance investing and the returns associated with the mission of the Tufts Endowment.
First, on ESG investing: According to Robert Jenkins, head of global research at Lipper, the issue with ESG investing is that you “can’t have materiality embedded within a metric in a qualitative fashion.” In other words, ESG investing prioritizes feelings over concrete details. Jenkins’ viewpoint seems to have proliferated with a number of firms and with investors; compared to Q4 of 2022, Q1 of 2023 has seen a decrease of 23% of companies mentioning “ESG” on earnings calls. Furthermore, total assets under management in ESG funds declined by approximately $163.2 billion globally during Q1 of 2023. As I wrote in my aforementioned article, big ESG funds have historically underperformed the S&P 500. Clearly, investing in ESG is risky; instead, you should focus on “investing long-term in renewables, not divesting from anything,” per my previous op-ed.
Secondly, on the endowment: The Tufts Investment Office’s objective is to “support the university's good works and its mission of being a student-centered research university dedicated to the creation and application of knowledge.” In addition, a substantial portion of the endowment’s returns each year are invested in general university expenses — it’s a crucial source of cash for Tufts. The Tufts Investment Office, in my view, is acting in accordance with this provision of the law: “the institution shall act in good faith … and shall consider, if relevant, the following factors:
- the duration and preservation of the endowment fund;
- the purposes of the institution and the endowment fund;
- general economic conditions;
- the possible effect of inflation or deflation;
- the expected total return from income and the appreciation of investments;
- other resources of the institution; and
- the investment policy of the institution.”
I am not a lawyer, but in my view, Tufts is in full compliance with the law. TCA, your legal complaint is unwarranted. The investment policy of Tufts is to increase the value of the endowment and “support future generations, in perpetuity.” They cannot do this if they invest heavily in ESG-infected financial products and also divest from existing fossil fuel investments. The energy sector has performed very well in recent years and, if anything, the Tufts Investment Office should increase its financial position in it. You cited how Tufts is required to “consider [its] charitable purposes.” They are already doing this. It’s called financial aid, professorship and scholarships. Instead of prioritizing divestment that won’t create material change, you should consider the needs of the institution.
I am aghast at the lack of critical thinking on this. You should want the endowment to succeed in the long term, both through increased financial returns and donations, in order to provide funding that can bolster advantageous green initiatives. This will only happen if you leave the folks at the Investment Office alone and focus your energies on impact investing.
It seems that no one in TCA has pondered a simple question: If Tufts were to divest, what impact would that have on the fossil fuel industry? Here’s the answer: none. Divesting is not the answer, and the reports from Wall Street should have told you that.
